2016.04.26. 1 Innovation driven regional development Case study region Twente, Eastern Netherlands Jacques Bazen Lecturer international economics Contents Part I – What history teaches us about economic development (Case study, Twente) Part II – What could be done to achieve economic development Part III - Conclusion The innovation journey Golden rules of successful innovation: (According to Microsoft) 1.It is something new. 2.I want to have it! 3.Why didn’t I think about it? PART I What history teaches us Regional Development “You have to know the past to understand the present.” – Carl Sagan (astronomer) Every time period adds its own building blocks Region Twente Eastern Part of The Netherlands
Transcript
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Innovation driven regionaldevelopmentCase study region Twente, Eastern Netherlands
Jacques BazenLecturer international economics
Contents
Part I – What history teaches us abouteconomic development (Case study, Twente)
Part II – What could be done to achieveeconomic development
Part III - Conclusion
The innovation journey
Golden rules of successful innovation:(According to Microsoft)
1.It is something new.2.I want to have it!3.Why didn’t I think about it?
PART I
What history teaches us
Regional Development
“You have to know the past to understand the present.” – Carl Sagan (astronomer)
The largest steam driven textile factory was operated by the Van Heek family. Largest industrial firm of the Netherlands in 1910.
Hendrik Jan van Heek
Gerrit Jan van Heek
Golden Age of Twente
Enschede, a boom town… Early 20th century
A Wealthy city
On average Enschede was one of the most wealthy cities in The Netherlands in the early 20th century.
But a big division between rich and poor
The downfall of the textile industry
After the second world war, Van Heek and the other textile factories were considered giants: Too big to fail…
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But they still failed...
The question is why?
Why the textile industry failed
• Direct reason: Too high wages. Due to globalization, too strong competition
• But there is more: Technical development: High tech had become low tech…
• The second and third generation of factory
owners lost the entrepreneurial spirit fortresses of conservatism
• Too little innovation result: Failure
Notable exception
One textile factory succeeded in turning the tide and become innovative & world leading: Ten Cate in Nijverdal.
Employment in the textile industry
0
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1969
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2011
x100
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Development of number of jobs in the textile industry from 1969 to 2011
Disappearance of the textile industry
“Innovation comes with creative destruction”, Josef Schumpeter
What/who doesn’t innovate becomes obsolete! New replaces old
Polaroid Enschede,Efficient… but not effective!
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Hengelo
• Hengelo fared a little better than Enschede and Almelo
• Reason: Hengelo was mainly focused on machine building. More innovative and more highly educated workforce.
Higher education in NL
How to deal with such a crisis?
• When a region is so much in crisis like Twente…
• Can you do something?
• If so…who should do something… and what… which measures work to improve the situation?
• And what if you do nothing?
Enschede city center
Enschede city centerThe problem:
The vicious circle
• Less jobs means less opportunities
• Less opportunities mean people will move out
• If people move out… then companies and services have less customers and potential employees…
• There is a chance more companies move out or get bankrupted…
• Go to the first bullet on top of this page…
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The vicious circle
Example: Detroit
Once the pride of America’s car industry…
Population fell by 25% between 2000 and 2010
The virtuous circle
Example: San Francisco Bay Area
Communities in the Bay Area grow very fast because of the technology boom.
Theories about development
Richard Florida: The creative class causes economic growthThe more you can attract them the better
PART II
What could be done?
Regional Development
What is the role of the government and the market in developing regions?
Somewhere along the continuum:
• Planned economy, government decides what will be where (North Korea).
• Laissez-faire economy, government lets market forces decide what will be where (USA).
How did the Dutch government act?
“Middle position” on the continuum, moving towards direction of capitalism throughout the decades.
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Main problem with regional development policy
The Netherlands is not a laboratory… very difficult to measure results of policies
What are characteristics of well developed regions?
How would you measure them? And influence them?
Preconditions
When making regional development strategies, there are some important conditions:
The European Union forbids quite a lot:
- Anti trust legislation (anti monopoly and anti cartel)
- No state operating aid for companies
- No protectionism at the border / free trade
How did the Dutch National government act?
Regional policy in Twente (National level):
- Phase 1 (1970s): Strong regional economic
policy. SIR system
- Phase 2 (1980s, 1990s): Investment support
- Phase 3 (1990s, 2000s): Corridor development
- Phase 4 (2000s, 2010s): Development of the area: creative economy & human capital & entrepreneurship support
Regional policy in Twente
• Phase 1 (1970s): SIR (SelectieveInvesteringsRegeling) Attempt to move new projects to the periphery of the country.
• Little success…
Regional policy in Twente
• Phase 2 (1980s, 1990s): Investment bonuses, 15%
• Little success…Companies seemed to prefer something else
Regional policy in Twente
• Phase 3 (1990s, 2000s): Focus on transport corridors & infrastructure
• Success? Why stop in Twente if you drive from Rotterdam to Berlin?
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Regional policy in Twente
• Phase 4 (2000s, 2010s): Focus on the economic structure region itself.
• Supporting entrepreneurship as driving force for development
• Attention for the creative sector (based on ideas of Florida)
• Difference: Focus on developing the strengths of the regions, not solving the weaknesses
Regional policy in Twente
• Since 2011: NO national regional development policy anymore in The Netherlands.
• Since 2014: Sectoral development policy, so called “Topsector” policy, in order to develop the strengths of economic sectors and support specialization.
• Regions have to develop their own strategies, and will receive support from the national government for development projects.
Regional policy in Twente
Of three policy measures implemented in Twente we are pretty sure that they are working in terms of developing the region:
1. Investment in Human Capital (Higher Education)
2. Supporting Entrepreneurship
3. International cooperation
Investment in Human Capital
• Dutch National government expected since the early 1960s the downfall of the textile industry
• And decided to invest in technical higher education, to keep the region attractive: Building the University of Twente, est. 1962
Investment in Human Capital
University of Twente functioned as a magnet for Enschede for young people, but the challenge was to let them stay
Alumni migration of the University Twente
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Investment in Human Capital
The idea of the Entrepreneurial University, for example developed at Stanford University offered some ideas about retaining graduates
Investment in Human Capital
University of Twente adopted very early on the policy of becoming Entrepreneurial university
Rector Van den Kroonenberg
High Tech campus development
Shifts in government policy
Earlier phases:
- Attracting large investment projects
- Attention for building infrastructure
- General idea: Creation of any jobs is good
Later phases:
- Attracting smaller firms
- Attention for local talent: stimulating enterpreneurship
- More attention for creative & high-tech jobs
Does it work?
Graduates who are entrepreneurs are more often staying in the region, more than the average graduates.
Alumni migration of the University Twente
Saxion start-up locations
In Twente
Outside
Twente region is cooperating withthe region Osnabrück andMünster for a long time.
The regions created a new cooperation platform calledEURegio in 1958. The first of itskind.
Now, almost 100 Euroregions
Alfred Mozer
International cooperation
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– Positive correlation between innovationand internationalisation in enterprises
– New enterprises that export are animportant factor for regional economicgrowth
– International start-ups are more ambitious than non international start-ups
– Positive correlation betweeninternationalisation and succesfulentrepreneurs
Research into International cooperation Innovation driven regional development
The ideas about and the current government policy of innovation driven regional development is going back to Josef Schumpeter: “Technological progress is the only real source of economic growth”.
Innovation driven regional development
What does it require of the society within regions?
- Trust
- Highly educated people
- Entrepreneurial spirit
- Cooperation between institutions (Triple Helix)
- Business clusters (even better: Rainforest ecosystem)
How to support innovation and entrepreneurship?
- Scouting & fostering talent and stimulating them to start their own business
- Coaching & Mentoringnascent entrepreneurs
- Research budgets
- Supporting the development of clusters / building a rainforest innovationecosystem (Hwang & Horowitt)
Entrepreneurship ecosystemBusiness & Science park
Twente (Kennispark)
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Business & Science park Twente (Kennispark)
The question: Was it successful?
Why is it so hard to substantially improve the economic situation in regions?
“For whoever has, will be given more and they will have an abundance. Whoever does not have, even what they have will be taken from them” – Jesus Christ.
Self sustaining system
Emmanuel Wallersteins world economic system model
Wallerstein’s idea: Unequal exchange between developed and underdeveloped countries
Self sustaining system: Results
The clustering force
Richard Florida: Talent and development is more and more clustered in a smaller number of so called megaregions.
Internationally competitive clusters
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Attractive living environment theory
According to Richard Florida, attractive cities and regions are able to attract creative talents who are the agents of economic development.
Question is: Is Twente an attractive living environment?
Attractive living environment theory
What makes a region or city to be an attractive living environment?
Enschede
How do you rate Enschede?
Attractive living environment theory
According to Florida what really matters for thecreative class is:
Food High Life Sc. Water Che- Energy Profes. ICTTech Health mistry services
Entrepreneurship/spin-offs
In 25 years of entrepreneurshipsupport in Twente, around 750 companies andaround 6000 jobs have been created. Good scores, internationally seen, but…Is it enough?
Was it enough to change thestructure for this region?
Attractive employers?
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Unemployment percentage per municipality
R&D workers as % of totalworkforce
And what if people leave?Are they “lost” for the region?
• Migrants may become ambassadors for their region
• In many fast developing regions, reverse brain drain occurs: brain circulation
• Required: good and stable institutions
PART III
Conclusion
Development of TwenteStrengths of the region
• Stable population
• Lower labour productivity more labour intensive work
• Unemployment higher than average, large differencesin the region
• Potential strong innovative region relatively large investments in R&D
• Education level is increasing If relevant at all…relatively mild brain drain
• Strong High Tech Systems and Materials cluster
• Entrepreneurship level average however failure toretain growing successful businesses, Twente as “incubator region”
Challenges for the region
• Attracting and retaining young talents
• International orientation of the people “Getting fuel in Gronau”, but no further.
• Low ethnic diversity
• Dealing with empty derelict buildings in thecities
• Finding jobs for lower educated people
• Finding more attractive employers retaining growing start-ups in the region
